The Iowa Supreme Court determined that a consumer fraud claim against a contractor was not an "occurrence" and was not covered under the CGL policy. Dostart v. Columbia Ins. Group, 2025 Iowa Sup. LEXIS 48 (April 18, 2025).

    Tyler Custom Homes entered into a construction contract with the Dostarts to construct a custom-built, single-family residence, with construction to be substantially completed on or before June 11, 2018. On September 17, 2019, the Dostarts filed suit against Tyler Custom Homes for failure to compete construction. The Dostarts asserted, among other things, consumer fraud under the Iowa Code. Tyler Custom Homes' insurer, Columbia Insurance Group, defended under a reservation of rights.

    The jury rejected the Dostarts' breach of contract and warranty claims, but it returned a verdict in their favor on their consumer fraud claims and for exemplary damages. Columbia informed Tyler Custom Homes that the jury's verdict was not covered under the CGL policy. Accordingly, Columbia refused to indemnify the judgment. The Distarts were unable to collect their judgment directly from Tyler Custom Homes, and sued Columbia.

    Columbia moved for summary judgment, arguing that the policy did not provide coverage for several reasons: (1) consumer fraud was not accidental and thus not a covered "occurrence," (2) the consumer fraud did not cause "property damage," (3) consumer fraud fell within the CGL policy's intentional acts exclusion, and (4) the CGL policy expressly excluded punitive damages. 

    The Dostarts conceded that the policy did not cover punitive damages, but otherwise opposed Columbia's summary judgment. The trial court ruled that Columbia was entitled to summary judgment on the punitive damages claim but that genuine issues of material fact existed to the Dostarts' remaining claims. The court of appeals affirmed.

    The Iowa Supreme Court noted that the verdict form awarded the Dostart's damages for the cost to complete construction of the home and the consequential damages associated with being unable to move in as expected in the form of temporary living expenses. These were damages for the costs of what Tyler Custom Homes promised to do, but did not, and the consequential costs associated with Tyler Custom Homes' failure to timely complete the home as promised. 

    The Supreme Court had previously held that where the damages sought were limited to the very property upon which the contractor performed work, they are not damages to property contemplated by the policy. Here, damages to complete construction of the very property Tyler Custom Homes was hired to construct was not "physical injury to tangible property" contemplated by Columbia's policy. 

    Therefore, the trial court and court of appeals erred in denying Columbia's motion for summary judgment.